1. What is meant by the multiplier?

Give examples.
 

2. Distinguish fiscal policy from monetary policy

What is another well-known term for fiscal policy?
 

3. In the following cases what happens to the level of National Income?

the Government increases spending (through borrowing) without further increases in taxation.

The Government reduces income tax in the budget (without any other changes).

There is a sharp rise in savings due to special incentive schemes while business confidence falls.

There is a large increase in imports (while exports remain unchanged)

The corporate tax rate is increased leading to a significant drop in foreign investment

Government spending increases but private spending falls by the same amount.

4. If according to theory, National Income will rise as long as J (injections) > W(withdrawals), why not ensure that the level of injections always exceeds the levels of withdrawals in the economy?
 

5. What is meant by (i) a deflationary gap (ii) an inflationary gap?
 

6. If the size of the multiplier is 5 by how much must spending increase so that National Income can rise by € 5 bl.?
 

7. What is meant by per capita income?
 

8. If wages are index-linked (i.e. guaranteed to rise by the same amount as inflation) should we worry about a high inflation rate (say 100 % p.a.)?